White House Affirms Deal on Drug Cost

White House Affirms Deal on Drug Cost

by

David D. Kirkpatrick

WASHINGTON — Pressed by industry lobbyists, White House officials on
Wednesday assured drug makers that the administration stood by a
behind-the-scenes deal to block any Congressional effort to extract
cost savings from them beyond an agreed-upon $80 billion.

Drug industry lobbyists reacted with alarm this week to a House
health care overhaul measure that would allow the government to
negotiate drug prices and demand additional rebates from drug
manufacturers.

In response, the industry successfully demanded that the White House
explicitly acknowledge for the first time that it had committed to
protect drug makers from bearing further costs in the overhaul. The
Obama administration had never spelled out the details of the agreement.

“We were assured: ‘We need somebody to come in first. If you come in first, you will have a rock-solid deal,’ ” Billy Tauzin,
the former Republican House member from Louisiana who now leads the
pharmaceutical trade group, said Wednesday. “Who is ever going to go
into a deal with the White House again if they don’t keep their word?
You are just going to duke it out instead.”

A deputy White House chief of staff, Jim Messina, confirmed Mr.
Tauzin’s account of the deal in an e-mail message on Wednesday night.

“The president encouraged this approach,” Mr. Messina wrote. “He wanted to bring all the parties to the table to discuss health insurance reform.”

The new attention to the agreement could prove embarrassing to the
White House, which has sought to keep lobbyists at a distance,
including by refusing to hire them to work in the administration.

The White House commitment to the deal with the drug industry may
also irk some of the administration’s Congressional allies who have an
eye on drug companies’ profits as they search for ways to pay for the
$1 trillion cost of the health legislation.

But failing to publicly confirm Mr. Tauzin’s descriptions of the
deal risked alienating a powerful industry ally currently helping to
bankroll millions in television commercials in favor of Mr. Obama’s
reforms.

The pressure from Mr. Tauzin to affirm the deal offers a window on
the secretive and potentially risky game the Obama administration has
played as it tries to line up support from industry groups typically
hostile to government health care initiatives, even as their lobbyists
pushed to influence the health measure for their benefit.

In an interview on Wednesday, Representative Raul M. Grijalva, the Arizona Democrat who is co-chairman of the House progressive caucus, called Mr. Tauzin’s comments “disturbing.”

“We have all been focused on the debate in Congress, but perhaps
the deal has already been cut,” Mr. Grijalva said. “That would put us
in the untenable position of trying to scuttle it.”

He added: “It is a pivotal issue not just about health care. Are
industry groups going to be the ones at the table who get the first big
piece of the pie and we just fight over the crust?”

The Obama administration has hailed its agreements with health care
groups as evidence of broad support for the overhaul among industry
“stakeholders,” including doctors, hospitals and insurers as well as drug companies.

But as the debate has heated up over the last two weeks, Mr. Obama
and Congressional Democrats have signaled that they value some of its
industry enemies-turned-friends more than others. Drug makers have been
elevated to a seat of honor at the negotiating table, while insurers
have been pushed away.

“To their credit, the pharmaceutical companies have already agreed
to put up $80 billion” in pledged cost reductions, Mr. Obama reminded
his listeners at a recent town-hall-style meeting in Bristol, Va. But
the health insurance companies “need to be held accountable,” he said.

“We have a system that works well for the insurance industry, but
it doesn’t always work for its customers,” he added, repeating a new
refrain.

Administration officials and Democratic lawmakers say the growing
divergence in tone toward the two groups reflects a combination of
policy priorities and political calculus.

With polls showing that public doubts about the overhaul are
mounting, Democrats are pointedly reminding voters what they may not
like about their existing health coverage to help convince skeptics
that they have something to gain.

“You don’t need a poll to tell you that people are paying more and
more out of pocket and, if they have some serious illness, more than
they can afford,” said David Axelrod, Mr. Obama’s senior adviser.

The insurers, however, have also stopped short of the drug makers in
their willingness to cut a firm deal. The health insurers shook hands
with Mr. Obama at the White House in March over their own package of
concessions, including ending the exclusion of coverage for
pre-existing ailments.

But unlike the drug companies, the insurers have not pledged
specific cost cuts. And insurers have also steadfastly vowed to block
Mr. Obama’s proposed government-sponsored insurance plan — the biggest
sticking point in the Congressional negotiations.

The drug industry trade group, the Pharmaceutical Research and
Manufacturers of America, also opposes a public insurance plan. But its
lobbyists acknowledge privately that they have no intention of fighting
it, in part because their agreement with the White House provides them
other safeguards.

Mr. Tauzin said the administration had approached him to negotiate.
“They wanted a big player to come in and set the bar for everybody
else,” he said. He said the White House had directed him to negotiate
with Senator Max Baucus, the business-friendly Montana Democrat who leads the Senate Finance Committee.

Mr. Tauzin said the White House had tracked the negotiations
throughout, assenting to decisions to move away from ideas like the
government negotiation of prices or the importation of cheaper drugs
from Canada. The $80 billion in savings would be over a 10-year period.
“80 billion is the max, no more or less,” he said. “Adding other stuff
changes the deal.”

After reaching an agreement with Mr. Baucus, Mr. Tauzin said, he met
twice at the White House with Rahm Emanuel, the White House chief of
staff; Mr. Messina, his deputy; and Nancy-Ann DeParle, the aide overseeing the health care overhaul, to confirm the administration’s support for the terms.

“They blessed the deal,” Mr. Tauzin said. Speaker Nancy Pelosi said the House was not bound by any industry deals with the Senate or the White House.

But, Mr. Tauzin said, “as far we are concerned, that is a done
deal.” He said, “It’s up to the White House and Senator Baucus to
follow through.”

As for the administration’s recent break with the insurance industry, Mr. Tauzin said, “The insurers never made any deal.”

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